News

Trump’s tariff policy reshapes the global economic landscape: multi-dimensional impacts emerge
–from supply chain shocks to rising recession risks

1. Global markets are caught in a “tariff shock wave”

The comprehensive tariff policy recently implemented by the Trump administration has caused severe fluctuations in international financial markets. Since the end of 2024, the S&P 500 index has fallen by 12%, and the Russell 2000 small-cap index implies a 79% probability of a US recession5. Global stock markets are under pressure at the same time, with the MSCI Global Stock Index falling 20% ​​from its 2024 peak, officially entering a technical bear market8. This volatility indirectly affects the daily lives of non-investors through channels such as shrinking pension accounts and rising corporate financing costs58.

2. The hegemony of the US dollar is under a double squeeze

As a traditional safe-haven asset, the US dollar continues to weaken, and its exchange rate against the euro has depreciated by about 8% compared with the beginning of 2024, which is directly related to the trade imbalance caused by the US tariff policy. Historical experience shows that the US dollar depreciation cycle from 2000 to 2008 caused an average annual increase of 4.6% in the price of imported goods, and the current situation may reappear310. The more far-reaching impact is that the US dollar’s status as a reserve currency is suffering from a crisis of confidence – the US$9.4 trillion in US debt assets held by foreign countries are at risk of shrinking, which may accelerate the global de-dollarization process37.

III. IMF warns of “stalling risk” in the global economy
The latest report of the International Monetary Fund (IMF) has sharply lowered its forecast for global economic growth in 2025 from 3.3% to 2.8%, the lowest level since the outbreak of the epidemic in 2020. Among them, the United States itself has suffered the most, with its economic growth forecast lowered by 0.9 percentage points to 1.8%, and the probability of falling into recession in the next 12 months has risen to 40%410. The impact of the supply chain has become concrete: due to the characteristics of the North American automotive industry that parts cross borders an average of 6 times, tariffs have led to a surge in the risk of shutdowns of Detroit assembly lines, and the unemployment rate in the automotive industry in Ontario, Canada may exceed 8%610.

IV. The price transmission mechanism has been fully launched
Direct consumption impact:
Multinational companies such as Adidas and Mattel have announced price increases of 5-8% to the United States, and tariffs on basic metals have increased the cost of automobile manufacturing by US$2,000 per vehicle6. In terms of electronic products, the tax-inclusive price of MacBook Pro in the United States is only 7% cheaper than that in China, and the tariff dividend is being eroded rapidly9.

Rising costs in the industrial chain:
The $320 billion of imported parts that the U.S. manufacturing industry relies on are facing price increases, especially in key areas such as lithium batteries and semiconductors, where the dependence on China exceeds 30%, and corporate replacement plans require a 3-5 year transition period610.

Administrative costs surge:
Border customs inspection time has been extended by 50%, and the average number of trucks stranded on the Detroit-Windsor Bridge per day has reached 800, and logistics delays have led to an average monthly increase in inventory costs of 12%6.

V. Policy countermeasures and geo-economic reconstruction
More than 180 countries around the world have launched countermeasures, forming a “tariff-retaliation” spiral. Dalio of Bridgewater Fund pointed out that this game has six major effects: fiscal revenue transfer (which may reach $200 billion per year), global efficiency losses of about $0.5 trillion, inflation differentiation (the U.S. CPI may increase by an additional 1.2%), industrial protection has spawned inefficient production capacity, fierce competition for strategic resources, and forced balance of international payments7. The geo-economic structure is accelerating its restructuring, and the automotive industry is forming a regionalized supply chain of “North America-Europe-Asia”. Mexico has become the biggest beneficiary by taking over 23% of the transferred production capacity610.

VI. Policy choices at the crossroads
Although Trump claimed that “tariffs will generate $200 million in revenue every day”, the IMF model shows that if all trading partners retaliate, US exports will plummet by 63% and global GDP losses will expand to 0.5%. Current policies are pushing the world towards two possibilities: if tariffs continue, the probability of a global recession in 2025 will reach 60%; if a new trade framework is reached, growth is expected to rebound by 1.2 percentage points1510. Historical experience shows that the 1930 Smoot-Hawley Tariff Act caused global trade to shrink by 66%. The current tariff level is close to the peak of that period, and policymakers are facing a historic choice.